What does the "true average compound rate of growth" measure?

The "true average compound rate of growth" measures the average annual rate at which an invested dollar grows over time, taking into account the effects of compounding. This metric illustrates how much an investment increases in value on an annual basis, reflecting not just simple returns but the compounding effect where investment earnings generate additional earnings in subsequent periods.

This concept is crucial for evaluating the performance of investments as it provides a clearer picture of growth over time, especially when assessing the worth of retirement plans or long-term investment strategies. By understanding the average annual growth rate, investors can make informed decisions about their asset allocations and potential future earnings.

Other options do not directly address the specific measure of average growth rate. The total return of all investments over time focuses on the overall performance without breaking it down into an average annual rate. The average impact of inflation on returns specifically addresses inflation's role in real return calculations rather than the growth rate. The rate of returns in a specific industry pertains to performance metrics that are not necessarily compounded nor representative of an individual dollar's growth over time.